Yahoo Finance Dollar Loses Ground to Major Currencies as U.S. Starts to Lose Yield Advantage
The U.S. Dollar lost ground against all major currencies as investors awaited news about ending the three-day U.S. government shutdown. Despite optimism that a bill would be signed later in the day, dollar investors would not speculate in the Greenback that such a deal was forthcoming.
The primary driver of the recent weakness in the dollar has not been concerns about the length of the government shutdown, but rather worries that its yield advantage is being chipped away by expectations of rising rates in other countries like Germany.
The dollar may get a boost if a deal to fund the government is struck, but it’s not likely to last as investors are still likely to react to constant political bickering between the Republicans and Democrats. Some traders believe that this is likely to continue throughout the year making it difficult for the Trump administration to move forward on such issues as infrastructure spending.
The Euro rose on Monday against the U.S. Dollar, boosted by expectations that the European Central Bank may withdraw its stimulus earlier than expected. These expectations were supported by the accounts of its last policy meeting released earlier in the month. The ECB meets on Thursday.
The GBP/USD rose to its highest level since the Brexit referendum on Monday, fueled by optimism that Britain will reach a favorable divorce deal with the European Union.
Gold
Gold traded mostly steady on Monday, but still lost ground even with the dollar hovering around its three-year low. Increased demand for risky assets as well as rising Treasury yields may have put a lid on gold prices.
U.S. Treasury Markets
U.S. Treasury yields rose as investors saw limited economic fallout from the standoff in Washington and instead focused on the rapidly improving global economy.
Crude Oil
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures rose on Monday in a volatile trade. The markets started out higher in response to a drop in U.S. rigs and a conflict in the Middle East. Prices retreated at the mid-session on profit-taking and the news that Libya’s As-Sarah oil fields would reopen. A weaker dollar then drove prices back to the plus side into the close.
In other news, Saudi Energy Minister Khalid al-Falih said market rebalancing might not occur until 2019, suggesting it would take longer than OPEC had previously indicated.
Traders are also starting to become concerned about speculators holding record net-long positions, with bullish bets outweighing bearish ones. This may mean the market will have trouble attracting new longs, making it more difficult to extend the rally.
This article was originally posted on FX Empire
